Defined as a “holistic approach” to procurement, versus an individualistic one, procurement optimization is all about attaining optimum value creation by leveraging people, processes and technology. It also includes everything from initial scoping to data collection and analysis; improvement and implementation; follow-up and monitoring.
“The role of procurement extends far beyond the belief that procurement’s primary function is to obtain goods and services in response to internal needs,” says source-to-pay software provider Aavenir. “A world-class procurement process aims to optimize the whole procurement process to boost efficiency and create significant business value.
Procurement optimization produces a number of benefits and adds value to the overall organization. “It ensures efficiency in your procurement process which in turn has a domino effect of positive reactions within your entire organization,” Aavenir continues.
Done properly, procurement optimization can help supply chains become more efficient and cost-effective. It also allows organizations to focus on providing a higher level of value to its customers, namely because less time is being spent on manual operations.
According to Liberty Advisor Group, companies that optimize their procurement activities can also expect cost savings; more streamlined operations; improved data integrity and visibility; and higher levels of data accuracy across systems. “By taking a proactive approach to optimizing your procurement strategies, you can ensure that your business has the resources it needs to deliver value to customers cost-effectively,” the company adds.
Five Steps to an Improved Procurement Approach
Through face-to-face interactions with customers in offline settings and its online team's close monitoring of customer feedback, electronic components distributor WIN SOURCE has observed that—both historically and today—procurement professionals continue to view price as a crucial determining factor.
“This is because many businesses face budget constraints and cost control challenges, requiring procurement to operate within limited budgets,” the company says. And while procurement professionals need to ensure that the quotations provided by selected products or suppliers align with their cost considerations, other deciding factors are gaining prominence. “Decision-makers are not merely pursuing lower prices but considering price as one of several important aspects of procurement decisions,” WIN SOURCE notes.
Here are five ways procurement teams are making decisions that help optimize their processes, their supply chains and their companies’ overall operations:
- Factor in quality and performance. The quality of products is essential for long-term investments. Low-quality products can lead to maintenance or replacement issues, increasing overall costs. Additionally, product performance in meeting business requirements and improving productivity or efficiency is a critical concern for procurement professionals. Procurement teams need to prioritize the quality and performance of selected components as this directly impacts the quality and reliability of their final products.
- Don’t overlook logistics and delivery capabilities. Many customers have praised WIN SOURCE’s 24-hour shipping speed in customer satisfaction surveys. This is because time is often critical in electronic manufacturing and production. Production schedules and delivery deadlines can be very tight, making good logistics and delivery capabilities essential factors when choosing electronic component suppliers.
- Make sustainability a part of the procurement conversation. With the continuous increase in environmental regulations, purchasers need to ensure that selected components comply with environmental laws and industry standards. This includes waste disposal, hazardous substance restrictions and more. Therefore, buyers should also consider product sustainability, which includes production methods, material sustainability and emissions management.
- Pay attention to the warranty period. A longer warranty period typically indicates the supplier's confidence in the product's quality, thus reducing the purchaser's risk. “In recent years, as our company has grown and market demands have evolved, we have extended our product warranty from one year to three years,” WIN SOURCE notes. “This change reflects our confidence in our supply chain management and aims to enhance customer satisfaction.”
- Look for partners that provide support and service after the sale. Technical support has become increasingly important in recent years as procurement professionals seek out professional advice and support when selecting and using electronic components—and especially when facing technological complexity challenges. Trusted distribution sources like WIN SOURCE provide a dedicated technical support team that actively assists customers in problem-solving to ensure they can make informed procurement decisions.